Explain the different approaches of working capital policy. What are their consequences?

In financial management, working capital refers to the difference between a company’s current assets and current liabilities. It is a key indicator of a firm’s operational efficiency and short-term financial health. Managing working capital effectively is crucial for maintaining smooth operations and ensuring liquidity. Companies adopt different working capital policies depending on their business needs, risk tolerance, and operational strategy. These policies can broadly be classified into three approaches: conservative, aggressive, and moderate.

### Conservative Working Capital Policy

A conservative working capital policy involves maintaining a high level of current assets relative to current liabilities. Under this policy, the firm adopts a cautious approach and ensures that it always _____ _________ ______ __________ ____ _____ _________ _____ _______ __________ ____ __________.
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